Shun Yuen Co v. International Chemicals and Another

HCA000031/1948

IN THE SUPREME COURT OF HONG KONG

ORIGIRAL JURISDICTION

ACTION NO.31 OF 1948.

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Coram: Gibson C.J.

Date of Judgment: 28 August 1948.

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JUDGMENT

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1. In this action the plaintiffs issued a specially endorsed writ claiming the return of a deposit of $2000 made by them in connection with a written contract between the plaintiffs and the defendants for the sale of saccharin to the former by the latter. Subsequently an order was made for the filing of further pleadings and in due course a statement of defence and counterclaim was filed on behalf of the defendants and a statement by way of reply and defence to counterclaim was filed on behalf of the plaintiffs. The endorsement on the writ gave as the reason for the claim to the return of the deposit that the defendants had "failed to carry out the said contract in whole or in part." By way of defence to this claim, the defence pleaded certain facts amounting in effect to an allegation that the contract had been wrongfully repudiated by the plaintiffs and that the repudiation had been accepted by the defendants. They further claimed a specific sum alleged to represent "the loss attributable to the plaintiffs for repudiation of the said agreement for sale." In the reply and defence to counterclaim, the plaintiffs in effect denied that they had repudiated the contract and gave as the reason for their refusal to perform the contract the fact that the sacchairn which defendants claimed to have imported against the contract did not comply with the description provided for in the contract. I feel obliged to say at once that these pleadings, including the indorsements on the writ are, in a number of ways, unsatisfactory.

2. The contract in question is a contract in writing dated the 17th of September, 1947 for the purchase of "Saccharin Soluble Granular Crystals (Monsanto Brand)." Annexed to the contract is a photograph of the form of tin in which the saccharin was to be supplied. It appears from the evidence that this photograph was requested by the plaintiffs and supplied by or at the instance of the defendants. A considerable amount of evidence was called on behalf of the defendants in an attempt to show that the contract really related to repacked Monsanto saccharin in tins similar to that which was put in as exhibit H. In rebuttal of this evidence, other evidence was put in on behalf of the plaintiffs. In my opinion, the written contract is not shown to contain any latent ambiguity and, in any event, the evidence does not lead me to the conclusion contended for by the defendants. In particular, the broker who negotiated the contract, Mr. Kong Wing Cheong, gave evidence which I accept to the effect that the manager of the plaintiffs' firm, Mr. Kwok Pui Yuk, said expressly that he did not want repacked Monsanto - having in mind apparently a type of re-packing of which he knew which had a small label in the form of a slip of paper bearing the words "Monsanto Saccharin Repacked" - and the broker added later that the manager asked whether the photograph was of genuine Monsanto packing and was told by the broker "It must be - Look at the photograph." Certain other evidence was given to suggest that the plaintiffs' manager must have known that he was buying repacked saccharin of the type of exhibit H. but I am unable to accept this conclusion. I am satisfied that the offer made to the plaintiffs and which they accepted was that for which the contract on the face of it must be taken to provide. It was an offer of genuine Monsanto saccharin in a genuine Monsanto packing of the type shown in the photograph and bearing a genuine Monsanto label.

3. In paragraph 7 of the reply and defence to counterclaim, it is stated that the plaintiffs repudiated the contract on the grounds that the defendants were not nor had they ever been in a position to complete the contract. If this is an allegation that the contract was impossible as to performance from its inception, then, in my opinion, it was not competent for the plaintiffs to raise the matter in their reply in view of the limited endorsements on the writ but, in any event, the evidence does not satisfy me that the contract was in fact incapable of performance either from its inception or subsequently. It is true that the evidence was given of two types of genuine Monsanto packing represented by the tins exhibits E and G, and that there was no evidence of any other type of genuine Monsanto packing, but equally it is true that there is no evidence which establishes that genuine Monsanto packing of the type shown in the photograph was unprocurable.

4. There is evidence which I accept that saccharin in tins of the type exhibit H., arrived in the Colony on or about November 25th, 1947, in purported pursuance of the contract and it is admitted by the plaintiffs' manager that he was informed of such arrival both verbally and in writing. In particular, he was informed of the expected arrival by letter dated 8th November, 1947 and was informed of the actual arrival by letter dated the 1st of December, 1947.

5. This brings me at once to one of the principal questions in dispute in this case which is whether the plaintiffs repudiated the contract. Mr. Kwok concedes that he has never paid the balance of $480 due under the contract by way of deposit although it is common ground that the parties agreed verbally that it should be paid when he was informed of the name of the ship in which the saccharin was to arrive. As to this he says that he told the broker that the price was too high. He agrees also that he did not inspect the saccharin or pay the balance of the purchase price or make any attempt to take delivery although he was pressed by Dr. Thompson to do so. He agrees also that on December 6th he told Dr. Thompson he was short of money and asked for further time, but here we come to a conflict in the evidence. He says he was told to speed up the matter simply whereas Dr. Thompson says that he gave the plaintiffs 24 hours only in which to complete the matter. I by no means accept Dr. Thompson's evidence on all points but I accept it on this point. Indeed Mr. Kwok conceded in cross-examination that, if Dr. Thompson said he offered 24 hours and no more, he must be telling the truth. I am of opinion that Mr. Kwok did not obtain any extention after December 6th beyond the 24 hours offered by Dr. Thompson. I am further of opinion that by December 6th he had a reasonable time within which to complete his part of the contract and that his conduct amounted to a repudiation of the contract. This repudiation was clearly accepted by the defendants who proceeded to dispose of the goods in purported exercise of their powers under clause 6 of the contract.

6. Prima facie this repudiation was wrongful but the plaintiffs claim to justify it by reference to certain matters which only came to their notice subsequently. In the first place, they allege, although somewhat didactically, that the saccharin imported did not conform with the description in the contract but that on the contrary the labels on the tins were imitations and forgeries. They further allege that the tins imported contained only 14 ounces instead of 1 pound and that by reason of these facts defendants were not in a position to complete the contract.

7. As regards the first of these allegations, evidence was given in an attempt to prove not only that the labels on the imported tins were not genuine Monsanto labels, but also that the saccharin in the tins was not genuine Monsanto manufacture. As regards the labels, I have no hesitation in accepting this evidence. In the first place, the tins themselves contained the words on a part of the label not shown in the photograph on the contract "repacked for export." In the second place, I have before me the evidence of Mr. Wong Man Keung, the manager of Messrs. Sherley & Co. and of Mr. Bentley, the manager of Messrs Hodges & Co., that the labels are not genuine. This evidence was not the subject of cross-examination on behalf of the defendants and Dr. Thompson admits that he is unable to contradict it. It is moreover in accordance with all the probabilities of the case since it would be indeed hard to credit that the Monsanto company would allow their product to be repacked for export by another firm and to be labelled with a label which is only an imitation of their genuine label as illustrated by the tins exhibits E and G. Dr. Thompson made a point that under the law of the United States, all exports of saccharin were the subject of licensing control and that the United States government were unlikely to permit the export of tins with false labels on them, but I am unable to enter into this controversy since Dr. Thompson is not an expert in the laws of the United States nor have I before me any reliable evidence of the system of control in that country. Suffice it to say in conclusion on this point that the action of the Monsanto company and of their agents in this part of the world, on learning of the fact that tins bearing labels such as that on exhibit H were being exported and sold, is entirely consistent with the evidence that such export and sale were unauthorised. As regards the question of whether the saccharin in the imported tins was genuine Monsanto saccharin or not, the only reliable evidence given before me is that of Mr. Bentley manager of Messrs. Hodges & Co. I do not regard the evidence of the other witnesses on this subject i.e. Mr. Wong Man Keung, Dr. Thompson and Mr. Chung Fun as reliable evidence and Dr. Thompson's evidence that the size of the grains in the genuine Monsanto tins varied from time to time and Mr. Chung Fun's evidence that he could recognise genuine Monsanto by the diamond shape of the crystals alone I regard as purest fabrication. The only question which in these circumstances I have to ask myself is as to whether I can act on the evidence of Mr. Bentley alone. I accept Mr. Bentley's evidence that the saccharin in exhibit H is larger than and not the same size as the saccharin in ordinary genuine Monsanto tins of similar size and in this I am supported by the fact that tin exhibit H does not bear the manufacturer's code marks on the lid pointed out by Mr. Bentley in connection with tins E and G. Mr. Bentley was not however able to say definitely that the saccharin in exhibit H was not genuine Monsanto saccharin of another kind e.g. that supplied in drums and I accept also this reservation.

8. As regards the question of the weight of the tins, it is common to both sides that there was some shortage of weight and counsel assured me that, if necessary, they would agree on a monetary figure corresponding with the shortage. In the view that I hold, however, the necessity does not arise.

9. As regards the allegation that the defendants had placed themselves in a position in which they were unable to complete the contract, I am of opinion that the evidence given before me is insufficient to support the allegation. The contract was for Sept/Oct shipment from U.S.A. but under clause 4 of the contract, the sellers reserve the margin of 30 days over and above the contract time for shipment and/or arrival and there is no evidence which rules out the possibility that they could have supplied genuine Monsanto saccharin sufficiently in accordance with the terms of the contract.

10. I find as a fact that the plaintiffs purported to give notice early in January, 1948 of their intention to repudiate the contract on the grounds abovementioned and that on the 9th of January, 1948 their solicitors formally claimed the return of the deposit as in the letter of that date in the agreed correpondence. But, as I have held, they had already repudiated the contract themselves and their repudiation had been accepted.

11. It was argued on behalf of the plaintiffs that they could now justify their own repudiation on the grounds alleged in the pleadings notwithstanding that they did not know of them or put them forward at the time of the repudiation. The defendants dispute this proposition and I was referred by counsel on their behalf to the case of British and Beningtons v. M. Cachar Tea Company and others, 1923 A.G. 72 and also to the earlier cases of Braithewaite v. Foreign Hardwood Company, 1905 2 K.B. 543., Taylor and another v. Oakes Roncoroni and Company, Vo1. 27 Commercial Cases 1922 at p.261 and L.T.R. Vol. 127, 1922 at p.267. In case it may be relevant I have no evidence in this case that an actual delivery order for the goods was formally tendered by the defendants to the plaintiffs. I make this statement because of certain obiter remarks made by Greer J. in the case of Taylor and another v. Oakes Roncoroni & Co. abovementioned. I am, however, of opinion that in the light of these cases and in particular the Braithewaite case, it is clear law that the plaintiffs cannot now justify their repudiation on the grounds which were only put forward at a later date.

12. It is now necessary to consider then the effect of the wrongful repudiation of the contract by the plaintiffs in connection with their claim for the refund of the deposit and in connection with the defendants' claim for damages and I will deal first with its effect on the plaintiffs' claim for the refund of the deposit. The contract in this case does not state on what terms the deposit is paid or held, but it seems to be established by the authorities that in the absence of express provision or of any implication to the contrary a deposit of this sort is not recoverable when a contract goes off through the default of the depositor and not through the default of the other party. I refer, in particular, to the case of Howe v. Smith, Law Reports, 27 Ch. D. 1884 p.89 and Hall v. Burnell 1911 2 Ch. 551. The only question on which I have had any doubt is as to whether the deposit was recoverable irrespective of any damage suffered by the defendants. I think, however, that it is clear from the case of Howe v. Smith that the deposit is so recoverable. This appears both from the terms of the Judgment in the case and also from the facts because it appears that the property in the case was resold by the vendors at the original price. I therefore hold that the defendants are entitled to retain the $2000 deposit in this case.

13. As regards the question of damages, I notice that the defendants have not put forward any claim to general damages under section 50 of the Sale of Goods Ordinance but only a claim to specific damages apparently based on the powers conferred on them by clause 6 of the contract. I have to consider first whether this claim for special damages can be supported and I will say at once that I am of opinion that it cannot. The contract in this case was clearly a contract for the sale of goods by description, and under section 13 of the Sale of Goods Ordinance there is a condition in such a case that the goods shall correspond with the description. Moreover, in the case of Scaliaris v. E. Ofverberg & Co. T.L.R. Vo1. 37 1921 at p.307 it was held - curiously in a case affecting Monsanto saccharin - that when goods are sold as being of a particular brand, the undertaking is that they will bear the label of the manufacturer which is put on the goods of that brand in the ordinary course of business and there is no obligation on the purchaser to accept goods which do not bear that label even though goods of that brand have been made by that particular manufacturer. It seems to me that when a contract is wrongfully repudiated by a purchaser, the purchaser is taken to waive the performance of any conditions or warranties in connection with the repudiation and so absolve the vendor from proving that he was able and willing to carry out the contract. But the purchaser does not necessarily waive the performance of conditions and warranties for the purpose of any claim to damages. In this, I am fortified by the remarks of Lord Sumner in British and Beningtons case at the top of p.71 referring to the decision in the Braithewaite case. He says: "The case was dealt with as one in which the buyers had explicitly waived all conditions precedent, while retaining a right to rely on them as terms, the breach of which would sound in damages that could be given in evidence in reduction of the claim, and the judgment of Kennedy J., who had thus reduced the plaintiffs' damages was consequently affirmed." If the repudiation in the Braithewaite case could be held to be without prejudice to the buyers' right to reduce the damages in the circumstances of that case, it would, in my opinion, have been equally without prejudice as the defence to a claim for damages if the goods offered had been such that the buyers were entitled to reject them altogether as I have held that the plaintiffs would have been entitled to do in this case. I am of opinion that the goods in this case were not at all of the description provided for in the contract but were entirely different goods and that the defendants cannot base a claim for damages on any loss they may have suffered from the resale of such goods.

14. I have said that the defendants have not pleaded general damages and when I put to Mr. Wright the possibility of their being able to do so if I held that clause 8 of the contract was inappropriate, Mr. Wright replied that in that event he could not justify such a claim. I may perhaps add, however, that if general damages did fall to be assessed in this case on the available evidence in accordance with the principles of section 50 of the Sale of Goods Ordinance, then I am of opinion that no such general damages would be justified. There is no reliable evidence of the price at which saccharine conforming with the contract could have been sold at the date of the repudiation by the plaintiffs but there is the evidence of Mr. Wong Man Keung that saccharin of the 2 types illustrated by exhibits E and G were sold at the same price, from which I infer that the packing - did not so much affect the price so long as both the saccharin and the packing were genuine. In this connection I may mention that exhibit G appears to be a cardboard container only. There is the further evidence of the plaintiffs' manager that genuine saccharin Monsanto was selling on the 6th of December for $39.50 per tin, and there is the evidence of Dr. Thompson himself, that the price of genuine Monsanto had dropped by December, 1947 to an average price of $40.00.

15. I accordingly give judgment for the defendants dismissing the claim with costs and for the plaintiffs dismissing the counterclaim with costs.